I have a dedicated ubuntu server with hetzner.de. hetzner also provides a seperate backup space accessible via samba/ftp/sftp/scp.

In their support document about backups, the following line is mentioned.

"The direct use of rsync is not possible. The backup space can however be locally mounted using smbfs, sshfs or ftpfs, allowing a limited use of rsync. To take full advantage of rsync (such as incremental backups using hardlinks) an image file must be created, which should be mounted via loopback."

I would like to use rsync with incremental backups using hardlinks.
I think by loopback they mean http://en.wikipedia.org/wiki/Loop_device. can any one help on how I can create a image from the network location.

When you're done using it, you can umount /mnt/backup-mountpoint and umount /mnt/server-mountpoint, and then to update your backup later, repeat steps 1 and 3.

The Wikipedia page you linked is the correct topic, but the actual loopback device process is simpler than they make it seem. Dealing with the server mount is more complicated, and may require some experimentation. There are a number of other questions on this site for dealing with each of the above steps, in case you get stuck.

Thanks this answer helped. Though for some reason dd wouldn't terminate when I increased the count to compensate for the 100GB backup hetzner provides like this. dd if=/dev/zero of=/home/hetzner_bk/backup-fs.image bs=1048076 count=90000 so I used something like to see dd with a progress bar. sudo dd if=/dev/zero bs=2048 | pv -s 99G | sudo dd bs=2048 of=/mnt/server-mountpoint/backup-fs.image This also wouldn't end after the 99GB, so when the progress bar hit close to 99G, I had to find the pid for dd process, and send kill -15 $pid to abort it. Finally everything worked.
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vinosAug 15 '12 at 21:31